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AP Microeconomics

Subjects : economics, ap
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Costs that change with the level of output. If output is zero - so are TVCs.

2. Exists at the point where the quantity supplied equals the quantity demanded

3. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price

4. Exists if a producer can produce more of a good than all other producers

5. The difference between total revenue and total explicit costs

6. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.

7. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient

8. Ei > 1

9. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good

10. Ed = 1

11. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials

12. Occurs when LRAC is constant over a variety of plant sizes

13. The most desirable alternative given up as the result of a decision

14. The imbalance between limited productive resources and unlimited human wants

15. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately

16. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received

17. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms

18. Entry of new firms shifts the cost curves for all firms downward

19. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.

20. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply

21. The additional benefit received from the consumption of the next unit of a good or service

22. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity

23. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power

24. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF

25. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage

26. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good

27. ATC = TC/Q = AFC + AVC

28. Ed < 1

29. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0

30. Ed = (%dQd)/(%dP). Ignore negative sign

31. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market

32. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit

33. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good

34. When firms focus their resources on production of goods for which they have comparative advantage

35. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand

36. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax

37. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic

38. 0 < Ei < 1

39. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage

40. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter

41. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good

42. TR = P * Qd

43. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good

44. Ed > 1 - meaning consumers are price sensitive

45. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly

46. The total quantity - or total output of a good produced at each quantity of labor employed

47. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)

48. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied

49. Two goods are consumer substitutes if they provide essentially the same utility to consumers

50. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry